It’s historic. For the first time in the history of digital assets, Ethereum’s open interest is greater than that of Bitcoin. Something that actually seems to be a consequence of the Ethereum blockchain upgrade through The Merge.
Ethereum open interest is skyrocketing!
Yesterday, the Glassnode platform noted that Ethereum’s open interest figures on the Deribit exchange exceeded those of Bitcoin on all exchanges. With 5.6 billion dollars for Ethereum figures against 4.3 billion for Bitcoin.
Good to know: Open interest measures the total amount positioned on derivatives of a given asset. By “shorting” or “longing” an asset, the trader increases the open interest of this asset. In a more graphic way, the open interest synthesizes the permanent fight between the bulls (bull) and the bears (bear).
Earlier in the weekend, open interest on ETH even soared above billion. And hedge funds seem to be positioning themselves on the prince of cryptocurrencies. As data from The Block suggests that on July 30, global open interest on Ethereum options reached 7.58 billion. At the beginning of the month, this same indicator showed 2.74 billion dollars. That’s an increase of more than 175% in just 30 days.
The Merge eagerly awaited!
If for the first time in history the open interest of Ethereum exceeds that of Bitcoin , it is for a particular reason: the upgrade of the Ethereum blockchain. Elements which today push some analysts to affirm that Ethereum could take precedence over Bitcoin in the future.
While migrating from Proof of Work to Proof of Stake is expected to save more than 99% of resources for the Ethereum blockchain, investors seem to be betting on a successful migration.
Not to mention that after the migration, Ethereum is expected to become a deflationary asset. A significant element in a context where inflation flirts dangerously with 10% whether in Europe or on the other side of the Atlantic. According to the latest data, the migration should take place on September 19.
Open interest: a tool to measure market sentiment!
In the world of trading , many tools can be used. If we often retain the indicators of technical analysis, certain data such as those of open interest are crucial to understand a market.
Concretely, open interest corresponds to the value of all current contracts on an asset that have not yet been settled . In other words, open interest specifies the number of contracts held by market players or investors that remain in waiting positions. Therefore, we understand why this tool can provide some insight into market sentiment. But also on the forces underlying the prices.
Ethereum at $3,000 in December 2022?
The return of institutional believers in Ethereum 2.0 could greatly influence the price of ETH. As Joshua Lim, Head of Derivatives at Genesis Global Trading, details:
A more recent phenomenon has been the popularity of low-premium ETH option structures from macro-discretionary hedge funds positioning themselves for the merger. A common pattern could be a buy butterfly which pays out if ETH/USD ends in December 2022 around the spot price of $3000. These longer-maturity, tiered structures inflate open interest in ETH options.
Either way, if Ethereum starts rising again, the asset could well drag the entire crypto market down in its wake. Since its low point last June, Ethereum has just gained 90%. If we refer to the last 30 days, the token is up 49%, a level that largely outperforms Bitcoin and its +19% in 30 days. If we are to believe the various prediction algorithms, the scenario of ETH at $3,000 within 6 months does not seem unrealistic.